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Mei Ping (Barbara) Matsumura and Carl Milner v. Benihana National Corp. and Haru Holding Corp

March 5, 2012


Appeal from the October 19, 2010 judgment of the United States District Court for the Southern District of New York (Buchwald, J.).


Matsumura v. Benihana Nat'l Corp.


1 Rulings by summary order do not have precedential effect. Citation to summary orders filed on or after January 2 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court's Local Rule 3 32.1.1. When citing a summary order in a document filed with this court, a party must cite either the Federal 4 Appendix or an electronic database (with the notation "summary order"). A party citing a summary order must 5 serve a copy of it on any party not represented by counsel.

7 At a stated term of the United States Court of Appeals for the Second Circuit, held at the 8 Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, 9 on the 5th day of March, two thousand twelve.


UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the order of the District Court is AFFIRMED in part, VACATED in part, and REMANDED to the District Court for further proceedings.

6 Plaintiffs-appellants Mei Ping (Barbara) Matsumura ("Matsumura") and Carl Milner 7 ("Milner") (jointly, "Plaintiffs"), minority shareholders in Haru Holding Company ("Haru"), appeal 8 a judgment of the District Court denying partial summary judgment to Plaintiffs, and granting partial 9 summary judgment to defendant-appellee Benihana National Corporation ("BNC"), on Plaintiffs' 10 breach of contract and breach of fiduciary duty claims. Plaintiffs also appeal the District Court's 11 denial of prejudgment interest.


13 We assume the parties' familiarity with the underlying facts, the procedural history of the 14 case, and the issues raised on appeal. In brief, Matsumura and Arthur Cutler founded a sushi 15 restaurant chain in New York City under the name "Haru" in 1996. Arthur Cutler died in 1997, 16 leaving Milner as trustee of a trust into which his ownership interest in Haru passed. In 1999, BNC, 17 an international restaurant chain, acquired a controlling interest in Haru, including shares formerly 18 owned by Matsumura. As part of this transaction, Plaintiffs retained a put option to sell their 19 remaining shares to BNC, which Plaintiffs exercised in 2005. The parties' dispute focuses on how 20 the shares tendered pursuant to that put option ought to be valued.

21 On August 5, 1999, BNC and Matsumura signed a Stock Purchase Agreement (the "SPA"), 22 which contained the terms of BNC's acquisition of a majority interest in Haru. The SPA 2 1 contemplated that BNC would borrow funds to pay for the acquisition. Section 11.1 of the SPA 2 provided that "[e]xcept as otherwise provided hereto, the parties hereto shall each bear its [sic] own 3 expenses in connection with the transactions contemplated by this Agreement, including the fees of 4 attorneys, accountants, advisors, brokers, investment bankers and other representatives and transfer 5 taxes." The SPA also contained a merger clause.

6 Section 6.2.5 of the SPA required the execution of a Stockholders' Agreement, a version of 7 which was attached to the SPA but never executed. On November 12, 1999, the parties executed 8 an Amendment to the Stock Purchase Agreement ("ASPA"), to which a revised version of the 9 Stockholders' Agreement ("SHA") was attached. On December 6, 1999, the parties executed the 10 SHA that had been attached to the ASPA. The SHA provided a put option, under which Plaintiffs 11 could exercise their right to require BNC to purchase their remaining 20% interest in Haru for the 12 "Put Price" during the period from July 1, 2005 to September 30, 2005.

13 The SHA provided a formula for valuing the Plaintiffs' put option: 14 "Put Price" means (A) Four and One-Half (4 1/2) times (B) the 15 Company's Consolidated Cash Flow for the Pricing Fiscal year, from 16 which total is subtracted (C) the Amount of Company Debt, which 17 total is divided by (D) the number of shares of Common Stock 18 outstanding as at the date of such computation.

20 Under the formula, an increase in Haru's "Consolidated Cash Flow" caused the value of Plaintiffs' 21 interest to rise (by a multiple of 4.5), while an increase in Haru's "Amount of Company Debt" 22 caused the value of Plaintiffs' interest to fall. This "Put Price" formula replaced an earlier provision 23 in the non-executed draft attached to the SPA that would have valued the Plaintiffs' interest at "Fair 24 Market Value."

1 The SHA provided the following definitions for "Amount of Company Debt" and 2 "Consolidated Cash Flow":

3 "Amount of Company Debt" means, as of the end of the Pricing 4 Fiscal Year, the total of all indebtedness (including all accrued and 5 unpaid interest) of the Company and its subsidiaries (including, 6 without limitation, indebtedness to stockholders of the Company and, 7 in the case of indebtedness to BNC, all accrued and unpaid interest 8 thereof computed at the rate of interest charged to BNC (or its parent, 9 Benihana Inc.) under their primary bank line of credit (which is, on 10 ...

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